Powerchip asks government for aid

PARTNERING UP After the government encouraged local chipmakers to tap foreign companies for technological help, Powerchip said it was in talks with Japan’s Elpida

By Lisa Wang / STAFF REPORTER

Powerchip Semiconductor Corp (力晶半導體) plans to submit an industry consolidation proposal by Friday to obtain government aid to ride out the most severe slump in the industry’s history, a company spokesman said yesterday.

That will be followed by another application filed yesterday by Powerchip, the nation’s largest computer memory chipmaker, seeking government assistance in bank loan rollover, the official said.

Powerchip is the second local maker of computer memory chips, known as dynamic random access memory (DRAM) chips, to make the request, after ProMOS Technologies Inc (茂德) asked for government support on Dec. 10 to help it fare the prolonged downturn.

“We have two relief plans,” Powerchip spokesman Eric Tan (譚仲民) said by phone. “We already requested an extension on our bank loans, and we will submit another plan by Friday about how we would like to strengthen our technological abilities with our overseas partner.”

Japan’s Elpida Memory Inc is not only Powerchip’s major customer for DRAM chips but also a technological partner in developing advanced DRAM manufacturing technologies.

Last week, the government encouraged DRAM companies to come up with consolidation proposals and to obtain stronger technological support from their overseas partners in exchange for relief funds from the government.

The government said it might also consider buying a stake in the newly formed entities via a national development fund.

Citigroup analyst Timothy Lam said in a note to clients yesterday that the government’s support should give local DRAM makers with better bargaining terms for technology transfer from their overseas partners, be it Elpida or Micron.

“If successful, this can help Taiwan DRAM makers obtain R&D resources to compete on the next-generation technologies, including DDR3 [double-data-rate 3] and emerging mobile DRAM applications, which we view as necessary to maintain their long term competitiveness against Korean vendors,” Lam wrote in the note.

Powerchip’s Tan did not comment on whether the company proposed to absorb ProMOS in its consolidation plan, saying only that it was in discussions with Elpida.

ProMOS, which has the highest liabilities of the nation’s major DRAM makers, may be becoming an acquisition target, with speculation both Micron Technology Inc of the US and Elpida of Japan are in pursuit of a merger deal with the Taiwanese firm.

“The government has the final say on this issue,” ProMOS spokesman Ben Tseng (曾邦助) said on the phone yesterday.

He declined to comment on whether high-ranking ProMOS executives had met their Micron counterparts on Monday as reported by the Chinese-language Liberty Times (the Taipei Times’ sister paper).

Separately, Powerchip confirmed a report that it would widen its output cuts by 20 percent to 25 percent starting this month, compared with the third quarter, Tan said. It previously said it planned to slash output by 10 percent to 15 percent beginning in September.

Widespread output reduction did help ease glut and may help the spot price of its benchmark DRAM — DDR2 1Gb 128MX8 eTT — rebound to the cost level of US$1 per unit, a DRAMeXchange Technology Inc’s (集邦科技) weekly report released yesterday said.

Powerchip and ProMOS are the major DRAM suppliers to the spot market, while Nanya Technology Corp (南亞科技), the nation’s second-biggest DRAM maker, primarily sells its products to PC makers on contract basis, the Taipei-based research house reported.